Oil price forecast: Bull flag breakout confirmed on the Brent chart
|The technical structure of the Brent oil market is calling a move higher to fresh four-year highs above the May high of $80.47. At press time, a barrel of oil is changing hands at $79.37.
Daily chart
As can be seen, Brent closed at $69.46 yesterday, confirming a bull flag breakout - a bullish continuation pattern, meaning the rally from the Feb. 13 low of $61.80 has resumed and prices could rise as high as $96.90.
The long-term moving averages (MAs) - 50-day, 100-day, and 200-day - are rising, indicating the path of least resistance is on the higher side. The 5-month and 10-month MAs are also trending north.
Still, the bull flag breakout target of $96.90 looks far-fetched for now. Moreover, such high prices will likely push up inflation, forcing the major central banks to normalize policy at a quicker pace. That, in turn, could lead to EM crisis, the slowdown in the global economy and drop in demand for crude. As a result, the OPEC and other major producers are unlikely to allow oil prices to rally towards $100.
That said, the technical setup is bullish enough to yield a test of the 100-month MA, currently located $82.63. Acceptance above that level would expose the June 2012 low of $88.52. On the other hand, a daily close below the ascending 10-day MA would abort the bullish view.
The bull breakout on the daily chart looks legitimate. Nevertheless, to be on the safe side, traders may wait for confirmation on a weekly closing basis before adopting a strong bullish bias.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.